Investing for a pension is an essential part of modern-day financial life. If one wants a comfortable retirement, one needs to start saving early. Pension planning is therefore essential. Here are a few simple facts to help with your planning:
1. You do not have to make regular monthly contributions to your pension. Most plans will allow you to vary the terms, perhaps increasing or decreasing the contributions, making lump sum payments or even stopping contributions for a while. So you have control and you make your contributions in-line with your income and circumstances there and then.
2. You do not lose your pension when you change job. You just keep any pension pot you have built up so far. If the new employer offers a pension and contribute towards it, then it makes sense to join since it effectively is free money.
3. It is possible to start a pension on behalf of a child or non-earner. You contribute up to £3600.00 per annum on behalf of child and still receive tax relief on the contribution.
4. You do not have to take your pension when you retire. Since April 2015, there is great flexibility in how you handle your pension pot once you reach the age of 55. You may withdraw all or part of pot, you may decide to defer withdrawals, or perhaps you make no withdrawals and keep investing, etc.
5. You can keep paying into your pension even after you retire and still receive tax relief on your contributions.
6. Pensions are usually free from inheritance tax. If you die before the age of 75, your beneficiaries will withdraw what they like from your pension and usually pay no tax.
7. Finally it is worth noting that pension is the most efficient form of savings, because the government will either directly contribute to the fund or you can claim the relief through your tax return. This amount to 20%-40% depending upon your circumstance.